Why Monthly Payment Comparisons Miss the Point

Comparing rent to a mortgage payment alone ignores three huge factors: the equity you build while paying down a mortgage, the appreciation (or depreciation) of the home itself, and the opportunity cost of tying up a large down payment instead of investing it. This calculator compares projected net worth under both paths instead.

How the Comparison Works

The renter is modeled as investing what they didn't spend on a down payment, plus the difference each year between what buying would have cost and what they actually paid in rent — growing at your chosen investment return rate.

How to Use This Calculator

The defaults reflect reasonable national averages, but your local market can vary significantly — adjust rent, home price, property tax, and appreciation to match your area. The "years you plan to stay" input matters enormously: buying generally looks worse over short horizons because closing and selling costs are spread over fewer years.

Why Time Horizon Changes Everything

Closing costs (around 3% of the home price) and selling costs (often 6%) are largely fixed regardless of how long you own the home. Spread over 3 years, that's a much bigger annual drag than spread over 15 years — which is why buying tends to favor longer stays, while renting is often more flexible and lower-risk for shorter timelines.

What This Model Assumes

• The renter actually invests the difference rather than spending it — a real behavioral assumption, not a guarantee
• Home appreciation and investment returns are applied as steady annual rates, not the volatile year-to-year reality of either market
• Property tax and insurance/maintenance scale with the home's appreciating value over time
• Selling costs apply only at the end of the comparison period, when the home is hypothetically sold

Non-Financial Factors This Calculator Doesn't Weigh

Stability, control over your space, forced savings discipline, and lifestyle flexibility all matter and aren't captured in a net-worth model. Plenty of people choose to buy or rent for reasons beyond which option "wins" financially — that's a legitimate part of the decision too.

Worked Example

A $400,000 home with 20% down ($80,000) versus $2,000/month rent, over a 7-year horizon: if the home appreciates at 3.5%/year and the renter's invested down payment grows at 7%/year, the comparison often comes down to just a few percentage points either way — small assumption changes can flip the outcome, which is exactly why it's worth running your own numbers rather than relying on a generic rule of thumb.

Where to Go From Here

If buying comes out ahead, check your actual qualification with our mortgage affordability calculator and down payment calculator. If renting wins, make sure that invested difference actually gets invested — pair it with our savings goal calculator to build the habit.

Frequently Asked Questions